Diamondback Capital Management LLC, among the hedge funds that was raided by the FBI about two years ago as part of the U.S. investigation of insider trading on Wall Street, is liquidating after clients pulled money.
The Stamford, Connecticut-based fund received requests from investors to withdraw about $520 million, or 26 percent of its assets, co-founders Richard Schimel and Lawrence Sapanski, said today in a client letter. They said they plan to return the majority of the money next month.
“We especially appreciate your patience and support during the last two difficult years during which we reached closure of the government’s investigation,” they said in the letter.
Diamondback has seen its assets shrink to $1.5 billion from $5.8 billion in November 2010, when its offices were searched by the Federal Bureau of Investigation. Three other hedge funds that were also raided at the time, including Level Global Investors LP, have all shuttered. Former Diamondback portfolio manager Todd Newman is on trial in Manhattan on charges that he was part of a “criminal club” of friends and co-workers who made trades based on illegal tips.
Diamondback in January agreed to pay more than $9 million to end an insider-trading investigation involving stocks including Dell Inc. (DELL)
Diamondback returned about 6 percent this year through yesterday and an annualized 9.1 percent since its June 2005 inception, according to a person with knowledge with the returns who asked not to be named because the information is private.
Hedge funds gained an average 1.8 percent this year through November, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index has returned 15 percent in the period.
By Saijel Kishan & Stephanie Ruhle
Courtesy of Bloomberg News